The impact of China's machinery market on foreign companies' sales is intensifying.

　China's developing economy presents a huge market for machinery, attracting global giants vying for market share. However, as China's modernized industrial construction and domestic machinery industry advance, the sales advantage of foreign companies in the Chinese market is diminishing. Currently, the impact of foreign companies' sales proportion in China on their overall sales is intensifying.
　　The global machinery industry underwent significant changes in 2012. Komatsu's financial report released on October 30 showed a 14% decrease in consolidated operating profit (US GAAP) for July-September 2012 compared to the same period last year, reaching 55.5 billion yen. Its sales in China decreased by over 40%. Sany Heavy Industry, China's largest engineering machinery manufacturer, experienced a nearly 70% decline in profit during the same period, while Caterpillar, less reliant on China, saw a profit increase of nearly 50%. Furthermore, the scale of stable revenue sources such as mining machinery also impacted company performance.

　　Komatsu's sales decreased by 6% to 460.9 billion yen in July-September. Sales in China were 21.7 billion yen, down 44%. Sales in other Asian countries were 52.4 billion yen, down 35%. Due to the decline in power coal prices, mining machinery sales in Indonesia were sluggish.

　　In China, due to weak infrastructure investment growth, the demand for engineering machinery is continuously and rapidly declining. However, in Komatsu's July-September sales of engineering machinery and vehicles, China accounted for only 5%, nearly half of the 9% in the same period last year. Due to double-digit growth in exports to Oceania and Central and South America, the impact of Chinese engineering machinery demand on Komatsu's performance is steadily decreasing.

　　Companies with relatively high sales dependence on China are clearly struggling. Hitachi Construction Machinery's operating profit for July-September was 7.6 billion yen, down 38%. The company's sales dependence on China is 8%, although it has decreased from 13% in the same period last year, it is still higher than Komatsu's. Sany Heavy Industry, with approximately 90% of its sales from the Chinese market, saw its operating profit decrease by 66% to 711.25 million yen, a significant drop.

　　Sany Heavy Industry surpassed Komatsu in sales last year and has become the market share leader in China. However, some analysts believe that Chinese companies are currently facing problems with excessive inventory and high accounts receivable. To gain market share, Chinese companies are launching price wars, squeezing their profits.

　　The world's largest manufacturer, Caterpillar, maintained strong performance. Operating profit for July-September was $2.596 billion, up 48%. Affected by China's economic slowdown, engineering machinery sales in the Asia-Pacific market decreased by 18%, but in the company's North American base market, engineering machinery sales increased by 23%, showing strong performance.

　　Caterpillar's strong performance also benefited from mining machinery. Mining machinery sales for July-September were $5.214 billion, up 13%. It accounted for 32% of consolidated sales, exceeding construction machinery (30%). While mining machinery demand has declined in some regions such as Indonesia, overall global demand continues to grow.

　　Komatsu's mining machinery sales for July-September increased by 20% to 163.3 billion yen, showing strong performance. Sales of mining machinery used for mining iron ore in Australia and copper ore in Central and South America increased. Mining machinery accounted for 40% of sales in the engineering machinery and vehicle sector, even higher than Caterpillar's.

　　Mining machinery sales are expected to grow by 13% year-on-year to 624 billion yen, maintaining stable growth. Komatsu President Kunio Noro said, "Order cancellations are nearing an end, and we expect to achieve our target for mining machinery sales this fiscal year."

　　On the other hand, mining machinery accounted for only 22% of Hitachi Construction Machinery's products from April to September, lower than Komatsu and Caterpillar. Strengthening the mining machinery business will be a future challenge.